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When Onboarding New Employees, Keep An Eye on Privilege Issues

When Onboarding New Employees, Keep An Eye on Privilege Issues

There are a lot of good folks out there who might help your company but who have noncompete agreements or other restrictions in agreements with their current or recent employers. To decide whether to hire such employees, you may decide that you should review their agreement, have discussions with them about the restrictions, and maybe even reach out to their prior employer. In that process, it is best to have legal counsel, either inhouse or external, helping with the review of the situation. It is a temptation to include the candidate in communications with the company’s attorney. However, be careful when instigating such communications because what is said – whether written or verbal – by the company’s attorney to that candidate may not be privileged. If no attorney client, work product, or common interest privilege applies, those communications may be subject to discovery should litigation ensue.

Privilege issues are governed primarily by state law so when exactly privileges will apply is likely  subject to a particular state’s law. State laws on privilege can vary widely so having a good understanding of the basics of privilege law in the state where the law most likely will apply to your onboarding employee is critical. One issue to understand under that state’s law is when the candidate becomes a client of the company’s law firm. If there is no intention of having the candidate be a client of the company’s law firm, then all communications with the candidate should be carefully considered to avoid any arguable waiver of privilege relating to communications containing legal advice or legal evaluation.

Another (related) question is whether any agreement is needed to invoke a privilege. Is a contract between the company and the candidate – for example, an indemnification and defense agreement or a joint defense agreement – necessary? Does the law firm need to send the candidate an engagement letter? Consider whether any privilege will apply to the time spent negotiating such agreements, which may make the date of entering into such an agreement very important.

There may be practical reasons why the company does not want to enter into an agreement with the candidate. For example, such an agreement could make the company a target of litigation by the candidate’s prior employer. If the company prefers to hold the candidate at arm’s-length while determining whether it can employ the candidate without violating the candidate’s agreement with a prior employer, then the company should act accordingly in being careful with communications with the candidate. Note that communications between a non-lawyer company employee and the candidate concerning legal counsel’s analysis of these issues may in some instances waive privilege between the company and their legal counsel.

These issues need to be carefully considered in onboarding potential candidates. Getting this one wrong can greatly impact future litigation.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.